How to Create a Personal Budget

Where You Are

Square one in the personal budget process is learning where you are financially. Start by determining your net worth. Use a personal finance software system to record your assets: the current values of your home, car, investments, bank accounts and retirement accounts. Record your liabilities, too: what you owe on your mortgage, car loan, credit cards, and student loans. If your total assets exceed your total liabilities, you have a positive net worth. If your liabilities exceed your assets you have a negative net worth.

What You've Got

The next step in the personal budgetary process is discovering what you have to work with. Financial pros refer to this as your personal cash flow. You can determine your personal cash flow by comparing your total monthly income to your total monthly expenses. Your monthly income includes any money you receive from any source - wages, tips, investment income. Your expenses is all the money that you are obligated to pay out to someone each month, such as rent or mortgage, utilities, insurance, car payments, student loans and credit card bills, plus your living expenses, such as food, clothing, gas and entertainment. If you make more than you spend, you have a positive cash flow. If you regularly send more than you make, you have negative cash flow, which means you're either drawing on your net worth or borrowing against future earnings to make ends meet.

Where You Want to Go

Before you can plot a course to take you from point A to point B, you must first know where point A and point B are. Point A is your starting point and point B is your financial goal. Your net worth and cash flow information tell you where your financial point A is, but point B is a bit more nebulous. It's different for every person, and it changes with your situation. Point B could be your ultimate personal financial destination, or it could be the first of many stopping points along the way. You have to decide what that is. Point B could be getting out of debt, building a secure retirement fund or creating a financial empire. It doesn't matter what your point B is, as long as you know what it is.

How to Get There

Your personal budget is the road map that allows you to get from point A to point B, financially speaking. "A budget is nothing more than a document that details how you spend your money," says Mark Noel, Certified Public Accountant. "Determine the period of time your budget will cover. Monthly is a good option for many people.” Use your personal finance software system to budget your expenses. Start with your monthly take-home income, then enter the amount of all of your monthly expenses, starting with the most important down to the least important. Each expense will reduce the amount you have available until you have either exhausted your money or your list.

Bumps in the Road

If you have money left over after paying all of your expenses, you have the option of saving, investing or paying additional on the principal amount of your debts. If you run out of money before you run out of bills, you'll need to make some adjustments. You might need to identify and cut back on some of your non-essentials. For example, consider taking your lunch to work a few times each week rather than eating out every day. You might need to sell that expensive car and buy a more economical model, or cut back on the cable service. "By having a working budget in place, you'll have a better idea of where your money comes from and where it goes, so you can make an informed decision about how to budget it," Noel says.

Take the next step towards your financial goals

We can help choose the right Quicken for you

† Limited time offer of 40% off the list price applies only to the purchase of Quicken Deluxe, Premier, Home, Business & Rental Property for the first year only when you order directly from Quicken by February 20, 2018, 11:59 PM PST. Offer good for new memberships only. Offer listed above cannot be combined with any other offers. Terms, conditions, pricing, features, offers and service options subject to change without notice.

Monitoring alerts, data downloads, and feature updates are available through the end of your membership term. Online services require internet access. Third-party terms and additional fees may apply. Phone support, online features, and other services vary and are subject to change. 14,500+ participating financial institutions as of October 1, 2017.

Standard message and data rates may apply for sync, e-mail and text alerts. Visit www.quicken.com/go/apps for details. Quicken app (“App”) is compatible with iPad, iPhone, iPod Touch, Android phones and tablets. Not all Quicken desktop features are available in the App. The App is a companion app and will work only with Quicken 2015 and above desktop products.

Quicken Bill Pay (Bill Payment Services provided by Metavante Payment Services, LLC) is included in Quicken Premier and above and is available on QuickenBillPay.com as a separate add-on service in Starter and Deluxe. 15 payments per month included in Premier and above.

Purchase entitles you to Quicken for 1 or 2 years (depending upon length of membership purchased), starting at purchase. Full payment is charged to your card immediately. At the end of the membership period, membership will automatically renew every year and you will be charged the then-current price (prices subject to change). You may cancel before renewal date. For full details, consult the Quicken License Agreement. You can manage your subscription at your My Account page.

30-day money back guarantee: If you’re not satisfied, return this product to Quicken within 30 days of purchase with your dated receipt for a full refund of the purchase price less shipping and handling fees. See www.quicken.com/30dayguarantee for full details and instructions.

Quicken for Mac software and the Quicken mobile app are not designed to function outside the U.S.

The VantageScore provided under the offer described here uses a proprietary credit scoring model designed by VantageScore Solutions, LLC. There are numerous other credit scores and models in the marketplace, including different VantageScores. Please keep in mind third parties may use a different credit score when evaluating your creditworthiness. Also, third parties will take into consideration items other than your credit score or information found in your credit file, such as your income.

VantageScore®, Equifax®, Experian® and TransUnion® are registered trademarks of their respective owners.

EQUIFAX is a registered trademark of Equifax Inc. The other Equifax marks used herein are trademarks of Equifax Inc. Other product and company names mentioned herein are property of their respective owners.